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5 January 2012

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‘Everyone under €75,000 a year would be better off under Sinn Féin’s proposals’

BUDGET 2012 INTERVIEW | PEARSE DOHERTY, SINN FÉIN DÁIL FINANCE SPOKESPERSON

Michael Noonan and Brendan Howlin

BY EOIN Ó MURCHÚ

BUDGET 2012 is an austerity Budget that is bad for people and bad for the economy. That’s how Pearse Doherty summed up Michael Noonan’s and Brendan Howlin’s proposals as presented to the Dáil last month.
“We look at this Budget in two ways,” Doherty says. “It’s bad for people, for those on low and middle incomes and who are depending on different services, such as our health and education services, and on social welfare. It’s bad for them because it takes from them.”
But as regards the economy in general, Doherty is equally dismissive. “Again on this indicator, the Budget fails. What it will do is suck more money away from the domestic economy through its stealth charges and through reducing the capital spend which will see less money invested in the economy.
“So,” he continues, “it will reduce the spending power of ordinary people, which will mean if there’s less people spending then there’s less money in the tills, which means less people employed, which means less income tax coming in and more social welfare payments going out, with less VAT coming in — so it’s bad for the economy as a whole.
“And the Government have in a way acknowledged this now by downgrading their own economic forecast by a further €300million just two weeks after the Budget. This shows that this Budget is deflationary and will do nothing for our own economic recovery.”
But accepting that the Government acknowledges this point to a considerable extent, the argument they put forward — especially the Labour Party — is that there is no choice because the huge deficit between income and expenditure must be bridged. And on top of which we have the problem of bank debt, and over-riding all of this is the fact that we have a deal with the European institutions and the IMF, upon whom we are dependent for financing the economy and who have committed us to this strategy. So I asked Doherty what choice did the Government really have? What would Sinn Féin have done differently?
Doherty is clear that indeed there is a choice despite the efforts of the austerity parties to pretend otherwise, and points to the fact that in the discussions that Sinn Féin had with the Troika (the European Central Bank, European Financial Stability Facility and the International Monetary Fund) it was made clear that how the deficit was bridged was a matter for the Irish Government, so long as the figures added up in the end, that is a reduction of the deficit to 8.6% of GDP in 2012.
And he points out that long before the European institutions stepped in, Fine Gael, in particular, had been arguing for measures just such as these – so to blame the Troika was just a cloak of convenience for the Labour Party which had capitulated to Fine Gael policy on this issue.
The point is that the Government refused to consider or undertake the other options, such as those that Sinn Fein put forward.
“Sinn Féin agrees, of course,” Pearse says, “that the deficit must be reduced. Sinn Féin’s costed alternative, based on stimulus and a rejection of austerity, will reduce the deficit by even more than the Government proposes.”
He explains: “Through a combination of tax increases on the wealthy and reductions in spending that do not hit the poor, Sinn Féin has shown that €3.5billion can be saved. But the difference between Sinn Féin’s savings and the Government’s is how it will be done.
“The Government,” he says,” is bringing in indiscriminate taxes like the hike in VAT, the Household Charge and the carbon  taxes, which take a billion euro out of the economy.
“Sinn Féin says that we can get this billion from standardising discretionary tax reliefs. This would leave people’s take-home pay untouched but equalise rebates on, for example, private pension investments with those available to every citizen, namely 20%.
“That would be a fairer measure because it wouldn’t hurt the economy as it is a discretionary tax.”
In relation to cuts in public spending, Doherty is equally dismissive.
“We’re seeing cuts in Fuel Allowance, in different social welfare payments, but Sinn Féin looked at cuts in other areas: such as capping public sector pay at the higher levels; we would have cut TDs’ and ministers’ pay and allowances, we would have stopped private schools being in receipt of public money.
“Instead, the Government is taking money off the most disadvantaged.”
Doherty explains that in his own constituency of Donegal South-West 36 out of 42 schools in the Gaeltacht are losing a teacher when the Government parties claim that they are behind the Irish language and supportive of education. “But their policies show a very different reality.”
Going back to the issue of taxation, I ask Pearse Doherty to comment on the Government’s argument that income tax increases act as an obstacle to job creation and that indirect taxes therefore were preferable despite Sinn Féin’s opposition to VAT increases and stealth taxes.
Doherty agrees that the Government argument might hold water if it were a question of increasing the rate of taxation on ordinary workers, but Sinn Féin has ruled that out and is concentrating its tax increase proposals on the very rich.
“Sinn Féin,” he says, “is proposing to reorganise how taxes are collected. By abolishing the Universal Social Charge and reintroducing the health and income levies at reduced rates we would see everyone under €75,000 a year better off under Sinn Féin’s proposals.
“But,” he adds, “we want to see additional taxes on that cohort above €100,000 a year – not to punish them for having well-paid jobs but because they have the ability to pay more and are better able to bear the pain than those on, for example, the minimum wage.”
“This would bring in €410million. And a French-style wealth tax would bring in €800million. And while welcoming the increases in capital gains and capital acquisitions taxes, Sinn Féin would have gone further and brought in another €228million.”
Doherty argues that such increases will not affect the spending power of ordinary people and will have minimal impact on the economy by taking the money we need from those who have the most.
But what about the argument, advanced by Mark Desmond of the Institute of Taxation, that the people at the top are already paying the lion’s share of taxes, and the case made by Michael McGrath of Fianna Fáil that if you tax the rich they will just leave the country?
Doherty’s answer is succinct: “The top 5% in society have far more than 50% of the wealth. And the reality is that, after allowances and rebates, most of these people have an effective tax rate of 30%, which actually means that they pay a smaller proportion of their income in tax than people who earn much less than them, for example schoolteachers or porters in our hospitals.
“The real question is who can absorb and pay more tax. Both the Government and Sinn Féin want to increase the tax take — but the Government wants to do from those on low and middle incomes, while Sinn Fein wants to do it from those on the top.
“The issue isn’t the so-called marginal rate of tax but the proportion that is taken in tax on the income as a whole.
“And Sinn Féin does not believe that an extra 7% on incomes over €100,000 is going to drive the top earners out of the country for they would still be paying a lower effective tax rate here than they would pay in Britain, for example.
“And remember they would benefit also from the increased spending power in the economy as a whole and through the better social benefits that could be provided for all.”
And what is the impact of the bank debt on the Budgetary solutions put forward by Sinn Féin?
Doherty is adamant that Ireland cannot and should not pay the debts of Anglo Irish Bank, the full cost of which Sinn Féin estimates at €86billion. He is dismissive of the ECB threats in this regard of withdrawing all funding, since that would cause the collapse of Ireland’s banks and lead inexorably to the collapse of the European banking system as a whole. “They will not cut their nose to spite their face,” he says.
Sinn Féin will negotiate this with the ECB but believes that the ECB will have no choice but to come to an accommodation.
In summary, Doherty says that the Government, with the enthusiastic support of the Labour Party, is committed to a policy of austerity which will make the poorest pay so that the German and other banks which financed the housing bubble will not suffer, an austerity that will further cripple the economy.
By contrast, Sinn Féin believes that no economy ever came out of recession through austerity, that a stimulus package of job creation based on infrastructural projects is needed, with the money coming from the rich, leaving the unguaranteed bondholders to pay for their own recklessness.
The choice is between a way forward based on the sound strategy put forward by Sinn Féin or more austerity and economic collapse.

 

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